Getting a business loan in today’s economic climate might seem like an impossible task. The truth is that while credit guidelines are tightening, there are still options for finding the funding that you need.
Below are some places you can learn how to get a small business loan.
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Banks– Banks may be the first option that comes to mind for many in need of a small business loan.
However, banks have very strict guidelines about who they will give small business bank loans to, and unless you have nearly perfect credit, you don’t have much of a chance.
Also, most banks want to work with established businesses rather than start-ups.
If you have a proven track record of running a similar business, you still have a good chance of getting a small business bank loan for your start-up. Another factor to keep in mind is the strength of the relationship you have with your bank.
If you have a long history with them, they may be willing to extend credit to you even if you don’t meet every requirement they usually seek.
Of course, in today’s economy, banks have tightened their guidelines, so be prepared to shop around.
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Small Business Administration (SBA)– Another good option is the Small Business Administration (www.sba.gov).
These government business loans are not granted directly to the small business. Instead, they are a guaranty to private lenders. You would still apply directly to a bank or other private lender.
If the lender feels that the application cannot be approved, they would require a SBA guarantee. Basically, the government is assuring the lender that, should the business owner default, they would pay the loan.
This works in much the same way that the VA and FHA offer a guarantee on mortgages. While not as strict as the banks requirements, the SBA does have fairly tight guidelines.
Visit their website to learn about the government business loan requirements in more detail.
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Finance Companies– Finance companies could be another good way for you to get a small business loan. They often have much more lenient guidelines than banks.
The downside is that they usually charge a much higher interest rate. Still, if you cannot get a bank loan, a business loan from a finance company may be a good option for you.
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Personal Investors– Seeking out personal investors can be challenging, but if you have a solid business plan and can demonstrate a measure of business savvy it may be something to consider.
You can even think about asking your friends and family members to become investors. Be clear about the amount that is needed and the terms of repayment, including the interest rate at which you will pay back the loan.
Keep in mind that no business has a guarantee of success, so there is a chance your business will fail and you will be unable to pay the loan back as promised.
Even in these harsh economic times, there are still ways to get the small business loans and government business loans that you need. Work on keeping your credit score up and you’ll be on the path to success.
